Utah
|
87-0627421
|
(State
of Incorporation)
|
(IRS
Employer Identification No.)
|
Large
Accelerated Filer o
|
Accelerated
Filer x
|
Non-Accelerated
Filer o
|
Page
|
|
PART
I. FINANCIAL INFORMATION
|
2
|
Item
1. Financial Statements (Unaudited)
|
2
|
Condensed
Consolidated Balance Sheets:
|
2
|
June
30, 2008 and December 31, 2007
|
|
Condensed
Consolidated Statements of Operations and Comprehensive
Loss:
|
3
|
Three
and Six Months Ended June 30, 2008 and 2007
|
|
Condensed
Consolidated Statement of Stockholders’ Equity
|
4
|
January
1, 2008 through June 30, 2008
|
|
Condensed
Consolidated Statements of Cash Flows:
|
5
|
Six
Months Ended June 30, 2008 and 2007
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements:
|
7
|
June
30, 2008
|
|
Item
2. Management’s Discussion and Analysis
|
28
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
|
40
|
Item
4. Controls and Procedures
|
40
|
PART
II. OTHER INFORMATION
|
41
|
Item
1. Legal Proceedings
|
41
|
Item
1A. Risk Factors
|
41
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
42
|
Item
3. Defaults Upon Senior Securities
|
42
|
Item
4. Submission of Matters to a Vote of Security Holders
|
42
|
Item
5. Other Information
|
43
|
Item
6. Exhibits
|
43
|
ASSETS
|
June
30,
2008
(unaudited)
|
December
31, 2007 (audited)
|
||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$
|
224,788
|
$
|
1,629,583
|
||||
Accounts
receivable, net of allowance for doubtful accounts of $190,306 and
$111,957 at June 30, 2008 and December 31, 2007,
respectively
|
764,260
|
2,134,978
|
||||||
Due
from receivable factoring
|
633,106
|
-
|
||||||
Investment
in sales type leases
|
7,995
|
16,501
|
||||||
Inventories
|
2,287,648
|
2,578,084
|
||||||
Prepaid
expenses and deposits
|
1,042,910
|
645,022
|
||||||
Total
current assets
|
4,960,707
|
7,004,168
|
||||||
Property and equipment, at
cost:
|
||||||||
Furniture
and equipment
|
1,669,495
|
1,660,493
|
||||||
Less:
accumulated depreciation
|
923,895
|
809,915
|
||||||
Total
property and equipment, net
|
745,600
|
850,578
|
||||||
Equipment under operating
leases, at cost:
|
||||||||
Telecommunications
and related equipment, at cost
|
146,299
|
313,941
|
||||||
Less:
accumulated depreciation
|
91,439
|
243,894
|
||||||
Total
equipment under operating leases, net
|
54,860
|
70,047
|
||||||
Cable and related
equipment:
|
||||||||
Telecommunications
and related equipment, at cost
|
6,622,289
|
5,764,645
|
||||||
Less:
accumulated depreciation
|
1,856,834
|
1,537,862
|
||||||
Total
cable and related equipment, net
|
4,765,455
|
4,226,783
|
||||||
Other
assets:
|
||||||||
Long-term
investments
|
62,803
|
62,803
|
||||||
Marketable
securities
|
2,982,963
|
4,541,167
|
||||||
Intangible
assets, net of accumulated amortization of $1,293,677 and $895,085 at June
30, 2008 and December 31, 2007, respectively
|
6,050,437
|
6,449,029
|
||||||
Financing
costs, net of accumulated amortization of $253,298 and $168,353 at June
30, 2008 and December 31, 2007, respectively
|
1,002,876
|
697,461
|
||||||
Goodwill
|
14,670,455
|
14,670,455
|
||||||
Deposits
and other
|
181,643
|
168,854
|
||||||
Total
other assets
|
24,951,177
|
26,589,769
|
||||||
Total
Assets
|
$
|
35,477,799
|
$
|
38,741,345
|
||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued liabilities
|
$
|
8,905,682
|
$
|
7,354,177
|
||||
Capital
lease payable – current
|
36,663
|
-
|
||||||
Related
party advances
|
691,000
|
291,000
|
||||||
Senior
note payable, net of debt discounts
|
-
|
1,470,820
|
||||||
Registration
rights liability
|
-
|
500,000
|
||||||
Deferred
revenue
|
269,353
|
250,613
|
||||||
Other
|
393,879
|
128,222
|
||||||
Total
current liabilities
|
10,296,577
|
9,994,832
|
||||||
Long-term
liabilities:
|
||||||||
Convertible
debentures, net of debt discounts
|
4,512,500
|
4,432,342
|
||||||
Capital
lease payable – non current
|
183,986
|
-
|
||||||
Derivative
liability
|
2,305,211
|
-
|
||||||
Deferred
lease liability and other
|
56,900
|
67,112
|
||||||
Total
long-term liabilities
|
7,058,597
|
4,499,454
|
||||||
Commitments
and contingencies
|
-
|
-
|
||||||
Minority
interest
|
3,344,680
|
2,978,918
|
||||||
Stockholders’
equity
|
||||||||
Preferred
stock, par value $.001 per share; 15,000,000 shares
authorized;
none
issued and outstanding at June 30, 2008 and December 31,
2007
|
-
|
-
|
||||||
Common
stock, par value $.001 per share; 130,000,000 shares authorized;
80,168,105 and 70,826,544 shares issued and outstanding at June 30, 2008
and December 31, 2007, respectively
|
80,168
|
70,827
|
||||||
Additional
paid-in-capital
|
116,424,632
|
112,013,093
|
||||||
Accumulated
deficit
|
(100,168,651
|
)
|
(90,815,779
|
)
|
||||
Accumulated
comprehensive loss
|
(1,558,204
|
)
|
-
|
|||||
Stockholders’
equity
|
14,777,945
|
21,268,141
|
||||||
Total
Liabilities and Stockholders’ Equity
|
$
|
35,477,799
|
$
|
38,741,345
|
For
The Three Months Ended
June
30,
|
For
The Six Months Ended
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Revenues,
net:
|
||||||||||||||||
Product
|
$
|
3,994,329
|
$
|
2,626,079
|
$
|
7,369,155
|
$
|
3,263,935
|
||||||||
Rental
|
1,630,208
|
1,040,528
|
3,214,403
|
1,648,941
|
||||||||||||
Total
Revenue
|
5,624,537
|
3,666,607
|
10,583,558
|
4,912,876
|
||||||||||||
Cost
of Sales:
|
||||||||||||||||
Product
|
2,407,378
|
1,935,481
|
4,959,317
|
2,364,949
|
||||||||||||
Rental
|
1,329,399
|
1,060,408
|
2,619,663
|
1,947,401
|
||||||||||||
Total
Cost of Sales
|
3,736,777
|
2,995,889
|
7,578,980
|
4,312,350
|
||||||||||||
Gross
Profit
|
1,887,760
|
670,718
|
3,004,578
|
600,526
|
||||||||||||
Costs
and Expenses:
|
||||||||||||||||
Research
and Development
|
492,689
|
615,205
|
1,157,811
|
1,089,808
|
||||||||||||
Selling,
General and Administrative
|
3,620,129
|
4,244,707
|
7,205,639
|
8,504,818
|
||||||||||||
Impairment
write-down in investment in affiliate
|
380,000
|
-
|
380,000
|
-
|
||||||||||||
Non-Employee
Stock Based Compensation
|
-
|
-
|
81,500
|
-
|
||||||||||||
Employee
Stock Based Compensation
|
206,432
|
307,425
|
428,630
|
661,611
|
||||||||||||
Employee
Stock Based Compensation of Subsidiary
|
134,096
|
28,456
|
267,397
|
28,456
|
||||||||||||
Depreciation
and Amortization
|
256,286
|
211,373
|
512,570
|
362,520
|
||||||||||||
Total
Operating Expense
|
5,089,632
|
5,407,166
|
10,033,547
|
10,647,213
|
||||||||||||
Loss
from Operations
|
(3,201,872
|
)
|
(4,736,448
|
)
|
(7,028,969
|
)
|
(10,046,687
|
)
|
||||||||
Other
Income (Expenses):
|
||||||||||||||||
Interest
Income
|
1,951
|
30,111
|
28,541
|
72,458
|
||||||||||||
Financing
Expense
|
(703,158
|
)
|
(66,973
|
)
|
(1,705,867
|
)
|
(200,557
|
)
|
||||||||
Gain
(Loss) on Derivative Liability
|
(1,018,453
|
)
|
-
|
(1,018,453
|
)
|
-
|
||||||||||
Registration
rights liquidated damages of subsidiary
|
-
|
-
|
500,000
|
-
|
||||||||||||
Other
income
|
-
|
-
|
270,950
|
-
|
||||||||||||
Other
expense
|
-
|
-
|
(1,598,203
|
)
|
-
|
|||||||||||
Total
Other Income (Expenses)
|
(1,719,660
|
)
|
(36,862
|
)
|
(3,523,032
|
)
|
(128,099
|
)
|
||||||||
Loss
Before Provision for Income Taxes
|
(4,921,532
|
)
|
(4,733,310
|
)
|
(10,552,001
|
)
|
(10,174,786
|
)
|
||||||||
Provision
for Income Taxes
|
-
|
-
|
-
|
-
|
||||||||||||
Loss
Before Minority Interest
|
(4,921,532
|
)
|
(4,733,310
|
)
|
(10,552,001
|
)
|
(10,174,786
|
)
|
||||||||
Minority
Interest
|
689,691
|
188,440
|
1,199,129
|
188,440
|
||||||||||||
Net
Loss
|
$
|
(4,231,841
|
)
|
$
|
(4,584,870
|
)
|
$
|
(9,352,872
|
)
|
$
|
(9,986,346
|
)
|
||||
Loss
per common share (basic and assuming dilution)
|
$
|
(0.05
|
)
|
$
|
(0.07
|
)
|
$
|
(0.13
|
)
|
$
|
(0.16
|
)
|
||||
Weighted
average common shares outstanding
|
77,319,806
|
66,747,862
|
74,583,911
|
62,699,631
|
||||||||||||
Comprehensive Loss: | ||||||||||||||||
Net Loss | $ | (4,231,841 | ) | $ | (4,584,870 | ) | $ | (9,352,872 | ) | $ | (9,986,346 | ) | ||||
Unrecognized loss on investment | (1,019,237 | ) | - | (1,558,204 | ) | - | ||||||||||
Comprehensive Loss | $ | (5,251,078 | ) | $ | (4,584,870 | ) | $ | (10,911,076 | ) | $ | (9,986,346 | ) |
Preferred
Shares
|
Preferred
Stock
Amount
|
Common
Shares
|
Common
Stock
Amount
|
Additional
Paid
in
Capital
|
Accumulated
Deficit
|
Comprehensive
Income (Loss)
|
Total
|
||||||||||||||||
Balance
at January 1, 2008
|
-
|
-
|
70,826,544
|
$
|
70,827
|
$
|
112,013,093
|
$
|
(90,815,779
|
)
|
$
|
-
|
$
|
21,268,141
|
|||||||||
Shares
issued in exchange for services rendered at approximately $1.09 per
share
|
-
|
-
|
312,911
|
313
|
340,094
|
-
|
-
|
340,407
|
|||||||||||||||
Shares
issued for cashless warrants exercised
|
-
|
-
|
1,000,000
|
1,000
|
(1,000
|
)
|
-
|
-
|
-
|
||||||||||||||
Shares
issued in connection with Private Placement
|
-
|
-
|
2,500,000
|
2,500
|
1,497,500
|
-
|
-
|
1,500,000
|
|||||||||||||||
Adjustment
shares issued for investment in affiliate
|
-
|
-
|
3,046,425
|
3,046
|
(3,046
|
)
|
-
|
-
|
-
|
||||||||||||||
Adjustment
shares issued for purchase of subsidiary
|
-
|
-
|
1,882,225
|
1,882
|
(1,882
|
)
|
-
|
-
|
-
|
||||||||||||||
Shares
issued from escrow contingency in purchase of subsidiary
|
-
|
-
|
600,000
|
600
|
379,400
|
-
|
-
|
380,000
|
|||||||||||||||
Value
of additional warrants issued in conjunction with anti-dilution
provision
|
-
|
-
|
-
|
-
|
173,640
|
-
|
-
|
173,640
|
|||||||||||||||
Stock-based
compensation expense related to the re-pricing of investor
warrants
|
-
|
-
|
-
|
-
|
1,598,203
|
-
|
-
|
1,598,203
|
|||||||||||||||
Stock-based
compensation expense related to employee stock options
|
-
|
-
|
-
|
-
|
428,630
|
-
|
-
|
428,630
|
|||||||||||||||
Holding
loss on available for sale securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,558,204
|
)
|
(1,558,204
|
)
|
|||||||||||||
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(9,352,872
|
)
|
-
|
(9,352,872
|
)
|
|||||||||||||
Balance
at June 30, 2008
|
-
|
-
|
80,168,105
|
$
|
80,168
|
$
|
116,424,632
|
$
|
(100,168,651
|
)
|
$
|
(1,558,204
|
)
|
$
|
14,777,945
|
For
The Six Months
Ended
June 30,
|
||||||||
2008
|
2007
|
|||||||
Cash
Flows from Operating Activities:
|
||||||||
Net
loss from operating activities
|
$
|
(9,352,872
|
)
|
$
|
(9,986,346
|
)
|
||
Adjustments
to reconcile net loss from operations to cash used in operating
activities
|
||||||||
Minority
interest
|
(1,199,129
|
)
|
(188,440
|
)
|
||||
Registration
rights liquidated damages
|
(500,000
|
)
|
-
|
|||||
Write-off
of fixed assets in conjunction with loss on sublease
|
-
|
64,608
|
||||||
Amortization
of financing costs
|
157,096
|
24,050
|
||||||
Amortization
of debt discount and warrant on convertible
debentures
|
285,625
|
62,821
|
||||||
Loss
on derivative liability
|
1,018,453
|
-
|
||||||
Impairment
write-down on goodwill
|
380,000
|
-
|
||||||
Value
of additional warrants issued
|
2,635,144
|
131,009
|
||||||
Stock
based compensation to employees and consultants in exchange for services
rendered
|
1,036,434
|
901,372
|
||||||
Depreciation,
including depreciation of equipment under operating leases and cable and
related equipment
|
965,848
|
711,422
|
||||||
Increase
/ decrease in:
|
||||||||
Accounts
receivable
|
1,357,567
|
(565,758
|
)
|
|||||
Due
from receivable factoring
|
(633,106
|
)
|
-
|
|||||
Inventory
|
290,436
|
123,323
|
||||||
Prepaid
expenses and deposits
|
(145,477
|
)
|
(131,832
|
)
|
||||
Customer
deposits and other current liability
|
245,389
|
(40,898
|
) | |||||
Accounts
payable and accrued expenses
|
1,314,739
|
818,994
|
||||||
Deferred
revenue
|
13,242
|
(101,501
|
)
|
|||||
Other
|
8,506
|
10,670
|
||||||
Net
Cash (Used in) Operating Activities
|
(2,122,105
|
)
|
(8,166,506
|
)
|
||||
Cash
Flows from Investing Activities:
|
||||||||
Costs
of equipment under operating leases and cable and related
equipment
|
(771,960
|
)
|
(733,141
|
)
|
||||
Investment
in subsidiaries
|
-
|
(4,050,557
|
)
|
|||||
Purchase
of property and equipment, net
|
(9,001
|
)
|
(189,154
|
)
|
||||
Net
Cash (Used in) Investing Activities
|
(780,961
|
)
|
(4,972,852
|
)
|
||||
Cash
Flows from Financing Activities:
|
||||||||
Proceeds
from issuance of convertible debentures, net of costs and
fees
|
1,575,000
|
5,303,238
|
||||||
Proceeds
from sale of common stock, net of costs
|
1,500,000
|
9,610,000
|
||||||
Proceeds
from subsidiary’s sale of common stock, net of costs
|
-
|
2,694,020
|
||||||
Proceeds
from exercise of stock options and warrants
|
-
|
111,960
|
||||||
Proceeds
from officer advances
|
400,000
|
-
|
||||||
Financing
costs
|
(462,511
|
)
|
-
|
|||||
Repayment
of capital lease and other
|
(14,218
|
)
|
-
|
|||||
Repayment
of senior note
|
(1,500,000
|
)
|
-
|
|||||
Repayment
of subsidiary loans
|
-
|
(200,598
|
)
|
|||||
Net
Cash Provided by Financing Activities
|
1,498,271
|
17,518,620
|
||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(1,404,795
|
)
|
4,379,262
|
|||||
Cash
and cash equivalents at the beginning of the period
|
1,629,583
|
1,644,037
|
||||||
Cash
and cash equivalents at the end of the period
|
$
|
224,788
|
$
|
6,023,299
|
For
The Six Months
Ended
June 30,
|
|||||||
2008
|
2007
|
||||||
Supplemental
Disclosures of Cash Flow Information
|
|||||||
Cash
paid during the period for financing expenses
|
$
|
175,532
|
$
|
3,420
|
|||
Income
taxes paid
|
-
|
-
|
|||||
Non-cash
transactions:
|
|||||||
Issuance
of shares for purchase of subsidiary
|
-
|
15,756,097
|
|||||
Amortization
of debt discount and warrant on convertible debentures
|
285,625
|
-
|
|||||
Loss
on derivative liability
|
1,018,453
|
-
|
|||||
Impairment
write-down on goodwill
|
380,000
|
-
|
|||||
Value
of additional warrants issued
|
2,635,144
|
131,009
|
|||||
Stock
based compensation to employees and consultants in exchange for services
rendered
|
1,036,434
|
815,574
|
|||||
Registration
rights liquidated damages of subsidiary
|
(500,000
|
)
|
-
|
||||
Capital
lease advances
|
226,185
|
-
|
|||||
Acquisition
of subsidiary (Note B):
|
|||||||
Assets
acquired
|
$
|
-
|
$
|
2,286,479
|
|||
Subscriber
lists
|
-
|
2,900,000
|
|||||
Goodwill
|
-
|
15,096,922
|
|||||
Liabilities
assumed
|
-
|
(1,356,415
|
)
|
||||
Common
stock issued
|
-
|
(15,756,097
|
)
|
||||
Direct
acquisition costs
|
-
|
(295,889
|
)
|
||||
Cash
paid for acquisition
|
$
|
-
|
$
|
(2,875,000
|
)
|
As
Reported
|
Including
Purchase
Price
Contingency
(*)
|
|||||||
Common
stock
|
$
|
2,700,000
|
$
|
7,200,000
|
||||
Cash
(including note payable)
|
1,800,000
|
1,800,000
|
||||||
Direct
acquisition costs
|
117,822
|
117,822
|
||||||
Purchase
price
|
4,617,822
|
9,117,822
|
||||||
Minority
interest
|
19,569
|
19,569
|
||||||
Total
|
$
|
4,637,391
|
$
|
9,137,391
|
As
Reported
|
Including
Purchase
Price
Contingency
(*)
|
|||||||
Cash
and other current assets
|
$
|
346,548
|
$
|
346,548
|
||||
Equipment
and other assets
|
1,310,125
|
1,310,125
|
||||||
Subscriber
lists
|
2,463,927
|
2,463,927
|
||||||
Goodwill
|
1,977,767
|
6,477,767
|
||||||
Subtotal
|
6,098,367
|
10,598,367
|
||||||
Current
liabilities
|
1,460,976
|
1,460,976
|
||||||
Total
|
$
|
4,637,391
|
$
|
9,137,391
|
As
Reported
|
||||
Common
stock
|
$
|
6,000,000
|
||
Cash
|
875,000
|
|||
Direct
acquisition costs
|
131,543
|
|||
Total
Purchase Price
|
$
|
7,006,543
|
Current
assets
|
$
|
1,646,054
|
||
Property,
plant and equipment
|
36,020
|
|||
Other
assets
|
8,237
|
|||
Goodwill
|
5,874,016
|
|||
Total
assets acquired
|
7,564,327
|
|||
Accounts
payable and accrued liabilities
|
(557,784
|
)
|
||
Total
liabilities assumed
|
(557,784
|
)
|
||
Net
assets acquired
|
$
|
7,006,543
|
As
Reported
|
||||
Common
stock
|
$
|
9,756,097
|
||
Cash
|
2,000,000
|
|||
Direct
acquisition costs
|
164,346
|
|||
Total
Purchase Price
|
$
|
11,920,443
|
Current
assets
|
$
|
949,308
|
||
Property,
plant and equipment
|
51,724
|
|||
Other
assets
|
21,602
|
|||
Subscriber
lists
|
2,900,000
|
|||
Goodwill
|
8,796,440
|
|||
Total
assets acquired
|
12,719,074
|
|||
Accounts
payable and accrued liabilities
|
(798,631
|
)
|
||
Total
liabilities assumed
|
(798,631
|
)
|
||
Net
assets acquired
|
$
|
11,920,443
|
As
Reported
|
||||
Common
stock
|
$
|
1,530,000
|
||
Cash
|
1,020,000
|
|||
Direct
acquisition costs
|
98,294
|
|||
Total
Purchase Price
|
$
|
2,648,294
|
Current
assets
|
$
|
-
|
||
Property,
plant and equipment
|
668,107
|
|||
Subscriber
lists
|
1,980,187
|
|||
Total
assets acquired
|
2,648,294
|
|||
Accounts
payable and accrued liabilities
|
-
|
|||
Total
liabilities assumed
|
-
|
|||
Net
assets acquired
|
$
|
2,648,294
|
For
The Three Months Ended
June
30,
|
For
The Six Months
Ended
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Product
revenue
|
$
|
3,994,329
|
$
|
2,626,079
|
$
|
7,369,155
|
$
|
4,179,961
|
||||||||
Recurring
revenue
|
1,630,208
|
1,571,842
|
3,214,403
|
2,524,921
|
||||||||||||
Total
|
5,624,537
|
4,197,921
|
10,583,558
|
6,704,882
|
||||||||||||
Net
(loss)
|
$
|
(4,231,841
|
)
|
$
|
(4,249,079
|
)
|
$
|
(9,812,890
|
)
|
$
|
(9,471,309
|
)
|
||||
Basic
(loss) per share
|
(0.05
|
)
|
(0.07
|
)
|
(0.13
|
)
|
(0.17
|
)
|
||||||||
Diluted
(loss) per share
|
(0.05
|
)
|
(0.07
|
)
|
(0.13
|
)
|
(0.17
|
)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
|
Residual
Value
|
Weighted
Average Amortization Period (Years)
|
||||||||||||||||
Amortized
Identifiable Intangible Assets:
|
||||||||||||||||||||
Subscriber
lists – MST
|
$
|
4,444,114
|
$
|
(703,765
|
)
|
3,740,349
|
8.0
|
|||||||||||||
Subscriber
lists - Ethostream
|
2,900,000
|
$
|
(191,320
|
)
|
2,708,680
|
$
|
-
|
12.0
|
||||||||||||
Total
Amortized Identifiable Intangible Assets
|
7,344,114
|
$
|
(895,085
|
)
|
6,449,029
|
-
|
9.6
|
|||||||||||||
Unamortized
Identifiable Intangible Assets:
|
None
|
|||||||||||||||||||
Total
|
$
|
7,344,114
|
$
|
(895,085
|
)
|
6,449,029
|
$
|
-
|
9.6
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
|
Residual
Value
|
Weighted
Average Amortization Period (Years)
|
||||||||||||||||
Amortized
Identifiable Intangible Assets:
|
||||||||||||||||||||
Subscriber
lists – MST
|
$
|
4,444,114
|
$
|
(981,523
|
)
|
3,462,591
|
8.0
|
|||||||||||||
Subscriber
lists - Ethostream
|
2,900,000
|
$
|
(312,154
|
)
|
2,587,846
|
$
|
-
|
12.0
|
||||||||||||
Total
Amortized Identifiable Intangible Assets
|
7,344,114
|
$
|
(1,293,677
|
)
|
6,050,437
|
-
|
9.6
|
|||||||||||||
Unamortized
Identifiable Intangible Assets:
|
None
|
|||||||||||||||||||
Total
|
$
|
7,344,114
|
$
|
(1,293,677
|
)
|
6,050,437
|
$
|
-
|
9.6
|
Fiscal
|
||||
July
1 through December 31, 2008
|
398,590
|
|||
2009
|
797,181
|
|||
2010
|
797,181
|
|||
2011
|
797,181
|
|||
2012
and after
|
3,260,304
|
|||
Total
|
$
|
6,050,437
|
2008
|
2007
|
|||||||
Raw
Materials
|
$
|
643,707
|
$
|
928,739
|
||||
Finished
Goods
|
1,643,941
|
1,649,345
|
||||||
Total
|
$
|
2,287,648
|
$
|
2,578,084
|
June
30,
2008
|
December
31, 2007
|
|||||||
Senior
Convertible Debentures, accrue interest at 13% per annum and mature on May
29, 2011
|
$
|
1,500,000
|
$
|
-
|
||||
Debt
Discount - beneficial conversion feature, net of accumulated amortization
of $20,027 and $0 at June 30, 2008 and December 31, 2007,
respectively.
|
(700,939
|
)
|
-
|
|||||
Debt
Discount - value attributable to warrants attached to notes, net of
accumulated amortization of $15,716 and $0 at June 30, 2008 and December
31, 2007, respectively.
|
(550,077
|
)
|
-
|
|||||
Total
|
$
|
248,984
|
$
|
-
|
||||
Less:
current portion
|
-
|
-
|
||||||
$
|
248,984
|
$
|
-
|
June
30,
2008
|
December
31,
2007
|
|||||||
Senior
Convertible Debentures, accrue interest at 8% per annum commencing on the
first anniversary of the original issue date of the debentures, payable
quarterly in cash or common stock, at MSTI Holdings Inc.’s option, and
mature on April 30, 2010
|
$
|
6,657,872
|
$
|
6,576,350
|
||||
Original
Issue Discount - net of accumulated amortization of $526,894 and $307,038
at June 30, 2008 and December 31, 2007, respectively.
|
(5,978
|
)
|
(219,312
|
)
|
||||
Debt
Discount - beneficial conversion feature, net of accumulated amortization
of $759,119 and $283,464 at June 30, 2008 and December 31, 2007,
respectively.
|
(1,365,450
|
)
|
(1,174,351
|
)
|
||||
Debt
Discount - value attributable to warrants attached to notes, net of
accumulated amortization of $568,768 and $181,118 at June 30, 2008 and
December 31, 2007, respectively.
|
(1,022,929
|
)
|
(750,347
|
)
|
||||
Total
|
$
|
4,263,515
|
$
|
4,432,342
|
||||
Less:
current portion
|
-
|
-
|
||||||
$
|
4,263,515
|
$
|
4,432,342
|
June
30,
2008
|
December
31, 2007
|
|||||||
Senior
Note Payable, accrues interest at 6% per annum, and matures on the earlier
to occur of (i) the closing of the Company’s next financing, or (ii)
January 28, 2008.
|
$
|
-
|
$
|
1,500,000
|
||||
Debt
Discount - value attributable to warrants attached to notes, net of
accumulated amortization of $195,924 and $166,744 at June 30, 2008 and
December 31, 2007, respectively.
|
-
|
(29,180
|
)
|
|||||
Total
|
$
|
-
|
$
|
1,470,820
|
||||
Less:
current portion
|
-
|
1,470,820
|
||||||
$
|
-
|
$
|
-
|
For the twelve months
ended June 30,
|
Amount
|
|||
2009
|
$
|
-
|
||
2010
|
6,657,872
|
|||
2011
|
1,500,000
|
|||
$
|
8,157,872
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||||
$1.00
- $1.99
|
4,378,429
|
4.78
|
$1.03
|
4,121,929
|
$1.00
|
|||||||
$2.00
- $2.99
|
1,593,000
|
6.50
|
$2.51
|
1,410,000
|
$2.49
|
|||||||
$3.00
- $3.99
|
1,569,000
|
6.79
|
$3.30
|
1,058,250
|
$3.36
|
|||||||
$4.00
- $4.99
|
127,500
|
6.71
|
$4.39
|
87,500
|
$4.42
|
|||||||
$5.00
- $5.99
|
135,000
|
6.61
|
$5.24
|
83,750
|
$5.23
|
|||||||
7,802,929
|
5.60
|
$1.92
|
6,761,429
|
$1.78
|
Number
of
Shares
|
Weighted
Average
Price
Per
Share
|
|||||||
Outstanding
at January 1, 2006
|
10,151,078
|
$
|
1.85
|
|||||
Granted
|
1,125,000
|
3.01
|
||||||
Exercised
|
(2,051,399
|
)
|
1.30
|
|||||
Cancelled
or expired
|
(703,750
|
)
|
2.67
|
|||||
Outstanding
at December 31, 2006
|
8,520,929
|
$
|
2.06
|
|||||
Granted
|
935,000
|
2.55
|
||||||
Exercised
|
(118,500
|
)
|
1.05
|
|||||
Cancelled
or expired
|
(1,232,000
|
)
|
3.00
|
|||||
Outstanding
at December 31, 2007
|
8,105,429
|
$
|
1.98
|
|||||
Granted
|
160,000
|
1.00
|
||||||
Exercised
|
-
|
-
|
||||||
Cancelled
or expired
|
(462,500
|
)
|
2.76
|
|||||
Outstanding
at June 30, 2008
|
7,802,929
|
$
|
1.92
|
2008
|
2007
|
|||||||
Significant
assumptions (weighted-average):
|
||||||||
Risk-free
interest rate at grant date
|
3.0%
|
|
4.7%
|
|
||||
Expected
stock price volatility
|
74%
|
|
70%
|
|
||||
Expected
dividend payout
|
-
|
-
|
||||||
Expected
option life (in years)
|
5.0
|
5.0
|
||||||
Expected
forfeiture rate
|
12.0%
|
|
12.0%
|
|
||||
Fair
value per share of options granted
|
$
|
0.62
|
$
|
1.61
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||
Exercise
Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
|||||
$1.00
|
1,815,937
|
3.84
|
$1.00
|
1,815,937
|
$1.00
|
Number
of
Shares
|